How care fee reforms may affect you

Hand and walking stick Standard fees in individual areas are key to the care costs system

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The government says it will spend an extra £1bn a year by 2020 helping older people in England pay for long-term care.

The eye-catching part of the announcement made earlier this month was that there would be a cap of £75,000 on the total amount any individual had to pay for their care when the new scheme begins in April 2017.

At present the cost of paying for care is open-ended. If someone in England has assets of more than £23,250, then they have to pay the full cost of their care for as long as they need it.

Someone who pays for themselves spends an average of four years in a home, according to research by Bupa.

The average cost in England is £532 a week for a residential care home or £750 for a nursing home, according to the Laing & Buisson market survey. This implies average spending of more than £100,000 in a care home and £150,000 in a nursing home.

So a plan to cap it at £75,000 seems welcome.

However, the reality is not quite so simple.

The cap explained

Firstly, the cap applies only to the care element of the cost. The cost for food and renting the room are not covered. The government recommends a cap on those costs of about £12,000 a year which would be paid by the resident even after the cap kicked in.

Secondly, the £75,000 cap is not going to be worked out as an amount of money. If someone chooses to go into a care home where the care costs £1,000 a week it would not be fair for them to get state support after 75 weeks but someone in a cheaper home where it costs £375 a week would have to wait for 200 weeks before their care was paid.

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The cap and the higher income threshold will begin in England in 2017 and only money spent after that date will count towards the cap”

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So the calculation is done using the standard fee which the local authority in the area would pay for the care that individual needed. And that would apply regardless of how much the individual actually paid.

In July last year, the government's response to the proposals published by the Dilnot Commission assumed that the care element cost about £350 a week.

By 2017, that would rise to about £430 a week, though it would vary from place to place. In 2012, full residential care ranged from £464 in the north of England to £600 in London, according to Laing & Buisson. Only when the individual has paid for £75,000 worth of care at the local authority rate - about 175 weeks on average - would the cap apply.

Thirdly, once the cap is reached then the bill would be paid by the local authority. But normally that would only be at its standard rate.

Any extra to continue with the same home and conditions would have to be paid by the resident or their family. At the moment the resident is not allowed to top up, only their family can. Health Minister Norman Lamb has told the BBC Money Box programme that, in the future, it "is the intention" to allow residents to top up themselves.

The capital limit

At the moment, in England, anyone with assets exceeding £23,250 must pay for the whole of their care. Someone with assets below that, but above £14,250, must pay a contribution.

Hand with cash There are options for those who feel their home might be at risk

In future the upper limit will be raised to £123,000 and the lower limit is expected to be raised to £17,500. So someone with, say, £100,000 in the bank will still have to contribute £330 a week towards their fees. Nevertheless, this element of the new scheme will give some help to a lot of people with modest assets.

No change is planned to the present rules which allow someone in a nursing home to claim the full fees without any means-test from the NHS, if their primary need is medical.

There are currently 60,000 residents and relatives of deceased residents with claims being considered, many of which date back to 2004.

Home sales

The final change promised by the government is that nobody would have to sell their home in their lifetime to pay for their care.

The value of the resident's home is ignored now and will be in future if their partner or a relative aged 60 or more lives there. In the new scheme the same rules will apply.

If the value of the home is counted, every council will in future have to offer a deferred payment scheme. The weekly care bill will clock up as a debt but it will not have to be paid until the resident dies and the estate settles the bill. Interest will be charged on the debt as it accumulates "so that local authorities can recover their costs". The total cost of the interest is likely to be a few hundred pounds.

The new scheme is very like the one which all local councils already have to offer under a 2002 law. A 2009 Department of Health circular says refusing such a scheme to all residents "would be unlawful". Under the current scheme there is no interest charged on the debt until 56 days after the resident's death.

The cap and the higher income threshold will begin in England in 2017 and only money spent after that date will count towards the cap. The national deferred payment scheme will begin two years earlier in April 2015.

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